Instead of completing an acquisition agreement with another company, Home Loan Servicing Solutions LTD will now sell off its assets.
An agreement had been announced in February for the
George Town, Grand Cayman-based company to be acquired for more than $18 a share.
That deal was valued at $1.3 billion and came just after HLSS, which is affiliated with Ocwen Financial Corp.,
received a notice of an alleged event of default under its servicer advance securitization.
On Monday, New York-based New Residential Investment Corp. — the buyer in the reported merger agreement — said the merger deal has been mutually terminated by both parties.
In the statement, HLSS Chief Executive Officer
John Van Vlack said, “Despite our efforts to pursue the merger as initially planned, certain circumstances prompted HLSS to pursue an asset purchase agreement with New Residential.”
Van Vlack explained that the new deal enabled HLSS to file financial results without a going concern qualification.
New Residential, which is affiliated with Nationstar Mortgage Holdings Inc., negotiated a new agreement where it acquired substantially all of HLSS’ assets and assumed substantially all of its liabilities.
Both companies’ boards of directors approved the new agreement, which didn’t require shareholder approval.
Michael Nierenberg, CEO of New Residential, explained in the announcement that a change of strategy was necessary.
“When it became evident that HLSS was unable to satisfy the merger conditions as originally expected, we worked collaboratively with HLSS management to structure this asset purchase to meet our mutual goals,” Nierenberg said.
The “equity purchase price” was around $1.2 billion, which worked out to $17.08 per HLSS share. Including newly issued New Residential shares, the deal worked out to $1.4 billion.
A significant factor in the transaction is a multi-year extension of Ocwen servicing contracts.
Ocwen Chief Financial Officer Michael Bourque stated, “Our entry into a relationship with New Residential, which includes an extension of our servicing contracts, will not only help to secure the financing of Ocwen’s servicing business but also provide additional stability to the mortgage servicing industry ”
New Residential’s CEO Nierenberg added, “We are excited for the opportunity to expand and strengthen our partnerships with both Nationstar Mortgage and Ocwen, the two largest non-bank servicers in the United States.”
